Apple, America and the ‘China Problem’

The secret is out: Apple has a worm inching its way through its corporate flesh. January was a tough month on the Cupertino, California company venerated for its innovation and vision.

The controversy emerged when an Apple contractor in China, a manufacturing facility known as Foxconn where many brand-name electronics are assembled largely by hand, made headlines when dozens of workers threatened to jump to their deaths over a labor dispute. Foxconn’s solution? Erect netting beneath roofs and windows.

It doesn’t end there. For 12-hour shifts, six-days-per week and a live-in lifestyle workers allegedly earn just $17, the New York Times reports. Forbes and PC Magazine added their own angle to the news. One such detail described a high-level manager who, at a Chinese zoo, asked a zookeeper to provide advice on how to deal with his workers, drawing a direct comparison between factory workers and undomesticated animals. It gets worse. A NYT piece, “In China, Human Costs are Built into iPad“, refers to two dozen accidental worker deaths that have occurred as a result of unsafe working conditions. Finally, in “This American Life” the narrator of “Mr. Daisey and the Apple Factory” recounts a first-hand meetup with underage Chinese workers, among scores of others who suffer permanent neurological tremors and ticks as a consequence of over-exposure to a chemical toxin.

For all the outrage, many argue such are the inescapable growing pains of a Third World labor force “coming up”. At one time, the United States, too, was known for worker exploitation, a chief reason child labor laws gained traction and unions became a bulwark against corrupt and abusive management practices. And yet, even at the height of the union movement in the US such organizations represented only a fraction of the workforce. Nonetheless, what began as labor negotiating with management to build a viable American middle class has transformed in recent decades to its polar opposite: a perception that unions destroy American prosperity.

Let’s turn these assumptions on their head for a moment. It may very well be in our best interest to support unionization movements in the Third World because only then will we stem the tide of human rights abuses and, at the same time, diminish the massive inequalities that allow US companies to do the math and abandon American soil — our workforce — in favor of nations that are institutionally in conflict to American democracy, liberty and justice. Rather than live down to a Third World “race to the bottom” standard, we who have already been down the road to civil rights in the First World ought to raise the international bar: mentor up-and-coming industrial nations in “best practices”.

Our choice is clear: In the absence of such a push Third World manufacturing will remain attractive in much the same way the American South benefited from plantation slave labor. In the US we fought a bloody Civil War to become a civil society. For all the doom-and-gloom of the incensed Southern plantation owner, certain the loss of low-cost labor represented a death-knell, the United States thrived in the post-Civil War era, particularly so after World War II.

Why tolerate and excuse “separate and unequal” practices overseas?

Blind-eyed consumerism turns us into self-serving hypocrites. And yet the shame we bring upon ourselves is far from the only reason to care about what goes on on the other side of the globe. We, too, suffer at our own hand in a less overt but equally-destructive manner: wage stagnation, loss of social mobility and growing deficits that, in the years to come, will increasingly link to tax revenue losses associated with declining (taxable) American affluence. What began some 25 years ago as an offshoring, outsourcing rush sparked the rise of the “too good to pass up” Chinese-made bargain at Walmart and has culminated in a high price indeed. Today, unlike then, economic necessity drives many Americans to purchase Third World goods because our buying power has slipped in direct proportion to the wholesale acceptance of patently unfair “free trade agreements”.

Ross Perot was right when he warned of the “giant sucking sound” of jobs leaving North American soil.

There’s nothing wrong with free trade in the true sense of free-market intent. There is, however, something very wrong with the negative notion that the widening gap between the “haves” and the “have nots” represents a valid manifestation of such a market. Globalization isn’t the problem per se: bad policy is. At the international trade table our “partners” aren’t playing the same free-market game — and therein lies the problem. The United States is increasingly bested by communists, socialists and managed market capitalists! Will we ever come out of economic decline if we don’t perceive the need for a course correction? Take a long, hard look at our 2012 presidential candidates: How many of them propose a viable industrial policy, speak of a solution to the trade deficits or call-out the perverse tax incentives that are shooting America’s economic interests in the foot?

Is it any wonder that our anti-liberty competitors — nations, like China, where government puts to death anyone who attempts to unionize — successfully defend their competitive advantage through currency manipulation, taxes on US-made goods and government-backed “private enterprise”? How nonsensical is it that we Americans glibly say it is “protectionist” to fight fire with fire!? Let’s call it what it is: a leveling of the playing field. It’s a necessary evil lest we become impoverished to a Third World degree!

This much is true: We can’t keep sitting complacently on the wrong end of the see-saw with the flat-earth expectation that we will maintain a fighting chance to compete through pure creativity or educational prowess. Now that our productive capacity exists primarily overseas, engineers, skilled machinists, prototype builders, and venture capitalists will increasingly take up residence there, too. That doesn’t leave much room for even the most highly-educated American student to succeed short of relocating to greener pastures. And therein lies the second problem: what we take for granted here — freedom of speech, religion and association — are criminal offenses in much of the world.

For all our romanticizing, the mobile, global “citizen of the world” is not one who can take the pursuit of life, liberty and justice for granted.

Change may be inevitable but it need not be an all-or-nothing proposition fraught with quasi-religious political dogmas. A large part of the solution lies in bringing Third World manufacturers into the 21st Century so that working conditions are not so dissimilar from our own. To do anything less than revisit and renegotiate the world’s FTAs is akin to running a hockey or football game with one set of rules for the home team and another set of rules for the visiting team. Nonsense! It’s time we got over our apparent death wish, stopped parroting the usual partisan talking points and rallied the courage to institute pragmatic trade reforms. In the long term, that reform needs to include incentives — if not sanctions — for “world citizens” (multinational corporations) that exploit vulnerable populations. Another crucial aspect to such reform is the diversification and development of affordable energy resources that will trim the cost of doing business: here, there and everywhere.

For any real improvement in the quality of workers’ lives we can’t simply point to economic opportunity in isolation. The individuals who live and work in China and elsewhere in the Third World must have some basic assurances in addition to their material needs: namely, that they are innocent until proven guilty and endowed with certain rights. Without the backbone we in the United States take for granted, the potential for such individuals to enjoy social equality, and therefore social mobility, are limited at best.

All too often, the Western view is that China and much of the Third World will go through a wayward period of industrialization and human rights abuses, to emerge one day with the same protections and freedoms enjoyed by Americans. And yet, in an increasingly connected world, making change within one’s borders is becoming more difficult as globalization exerts greater external pressures. When the United States made its greatest strides we were separated by entire oceans — a buffer that was instrumental to our independence but increasingly nonexistent today. In the US, moreover, we had a values system in place to sustain and uplift what would ultimately promote civil rights: namely, the concept that “all men are created equally” with the right to freedom of assembly and association. These precepts allowed early-American workers to unionize in order to further represent their interests. Gradually we have come to see unions as an overreaching force, but at the time they were a much-needed countervailing influence in a period of our history when worker abuses were far too common.

Without an existing framework of liberty, the social gains Americans achieved would scarcely have been realized as early or as completely. If we think that a repressive regime with whom we freely trade on the global market can be altered through the sheer force of modernization and economic progress — which apparently was the hope when Nixon opened up relations with China — we may have another thing coming. If and when that evolution or revolution comes to the Third World, it may come through such a degree of unrest, if not civil war, that it will come to look painfully short-sighted to stow so many of our manufacturing “eggs” in a single regional basket. In fact, the over-specialization and concentration of manufacturing capacity, in general, may come back to haunt us in a manner never before seen in human history. (A war or natural disaster concentrated in or near where the developed world manufacturers most of its critical products from prescription medications to electric grid components could have the same effect.)

If and when the Chinese people revolt against working 12-hour shifts, six days a week and living and eating in the factory barracks, change may come in the form of such disruptions to the supply chain that the world economy will feel pressured to aid the Chinese government in a return to the status quo for the sake of minimizing mass economic disruption and lost profits. Perhaps it is too late but it still needs to be said: Unless we successfully export democratic liberties and fair-trade principles to our trading partners and their labor forces before we come to rely on said nation for our own economic cohesiveness, we will be beholden to a ticking human-labor time bomb. Should the Chinese say “Enough!”, only for the government to react in a heavy-handed Tiananmen square manner, it is entirely possible that China’s globalized trade partners will be so overly concerned for their respective strategic interests and losses that support for a human rights uprising, past overdue though it may be, will be found lacking. Cries for better compensation and treatment will go largely ignored, and any instability in those regions of the world will be minimized in the American media so that we can go on telling ourselves that globalization has lifted more people out of misery and poverty than not.

Fair trade is in our best strategic and economic interest. It’s not a matter of “if” but “when”. Therefore, the sooner we get to the “when”, the sooner we minimize the harm — to all concerned.

If you are inclined to feel pessimistic, don’t. Consider the growing market for fair-trade coffee, non-GMO and organic foods. A growing number of consumers are willing to pay a premium for health and the satisfaction of being on the right side of the fence when it comes to labor practices. Scores of Americans, too, are more than willing to fork over a premium for a Chinese-made Coach handbag at no real cost savings for its origin simply because the brand carries a perception of value even though it is no longer domestically produced. I am arguing that the same market potential exists here. The assumption that Americans won’t pay for peace of mind or premium-branded US-made products remains largely untested in today’s climate of “conscious consumerism”. Anyone who prefers name-brand over store-brand pays a markup willingly, regardless of country of origin. It stands to reason there is a broader market for products created under fair trade conditions that remains largely untapped. It’s time to invest in symbiotic international relationships that actually work — not the dysfunctional thinking that crudely passes for globalized free trade.

In the spirit of thinking differently it is time to challenge the myth that US-made merchandise corresponds to massive price hikes. A modest 20-35 percent increase for the satisfaction of owning a few more US-made goods is likely to receive greater acceptance as the “jobless recovery” lingers, consumers become more quality conscious, and news of foreign-worker abuses in our hyper-connected small world begin to hit closer to home. There’s reason to believe that the competitive advantage of Third World manufacturing is itself unsustainable.

Why might the affordability gap between foreign-made goods and US-made alternatives narrow despite cut-rate overseas labor costs? Because gasoline and transport prices are on the rise. As energy prices increase, it becomes less cost effective to manufacture products thousands of miles away from their intended market. A push to “go local” and “manufacture Green” will mean that more First World consumers will value products that help their own communities in the perception that this is also the environmentally-responsible way to rebuild the social contract.

To manufacture products closer to one’s target market is not infeasible: one need only look to foreign auto manufacturers that have set up US plants to see that such arrangements are workable. Volkswagen, Honda and Toyota, among others, provide the proof that taking one’s manufacturing plants to your market — in this case to manufacture foreign automobiles with US labor — does not harm the bottom line. In fact, the decentralization of production may very well be a security investment against assembly-line disruptions that might otherwise occur when productive capacity is concentrated in a single geographical region where war or natural disaster can prove disastrous. Make no mistake: This is not an argument to move all production to the US. Rather, I argue equally that products destined for the Asian or European markets should be assembled closer to their respective consumers. In so doing, consumer electronics and appliances that are destined for the US consumer can and should be made here for reasons of economy, environment and quality control. After all, when more Americans are gainfully employed, upwardly mobile and fully equipped to participate in the global economy the more likely it is to benefit the profitability of manufacturers.

This argument comes down to a simple truth that the policymakers, CEOs and MBAs apparently overlooked in their haste to go global: What’s good for the goose is good for the gander. Corporations have a responsibility: to understand that an investment in their market is an investment in their bottom line. If this isn’t the quintessential definition of “rational self-interest” I don’t know what is.